March 6, 2026

How Far Has De-dollarization Come?

The US dollar has been the global reserve currency since before the 1930s, after displacing the British pound. Although other currencies like the Japanese yen or the euro have challenged it for over 90 years, none have succeeded in overthrowing the American currency. De-dollarization is the process of reducing the use of the US dollar as the world's primary currency for trade, foreign reserves, and financial transactions, replacing it with other currencies (like the yuan, euro) or assets (cryptocurrencies). This is driven by concerns over US debt, sanctions, and the desire of countries (China, Russia, India) for greater economic autonomy. It is a process of reducing the dependence of countries and central banks on the US dollar, primarily as a currency for paying for raw materials (oil, gas) and goods. The use of the dollar as a weapon (sanctions) and the freezing of Russian foreign exchange assets by Western countries in 2022 have compelled many nations to seek alternatives. De-dollarization has marked a reduction in the dominant role of the US dollar in global trade and reserves, affected by geopolitical and macroeconomic factors such as sanctions and inflation. This leads to the diversification of reserves (gold, other currencies, regional currencies) and the strengthening of regional economic blocs, but not a complete end to its dominance, rather a transformation of the financial system towards a multipolar model. De-dollarization aims to reduce US power, thus diminishing its influence on global monetary policy, to enable the strengthening of a multipolar world with multiple centers of economic power, and to create a new financial order with an increased role for regional currencies and institutions. However, it is a slow and lengthy process, and although the dollar's share in global reserves has decreased, many analysts believe the dollar remains 'dominant due to the lack of a liquid and stable alternative.' BRICS countries have numerous reasons to establish a new currency, including recent global financial challenges and aggressive US foreign policy. However, introducing a BRICS currency would require years of preparation, the establishment of a new central bank, and an agreement among the bloc's heterogeneous countries to gradually phase out their own sovereign currencies. While it is uncertain whether a BRICS reserve currency will emerge and when, its appearance would likely have significant implications for the global economy and could potentially challenge, or reduce, the dominance of the US dollar as the primary global reserve currency. US President Trump stated last year that BRICS is 'quickly disappearing,' warning that any attempt by the group to challenge the US dollar would be met with harsh economic repercussions. Trump condemned what he called BRICS' attempts to weaken the dollar, emphasizing that Washington would preserve the dollar's hegemony by all means: 'The reserve currency is so important. You know, if we lose that, it's like losing a world war.' In fact, eliminating the dollar as the world's reserve currency would have dramatic consequences for America itself. Demand for the dollar would no longer be 'inelastic,' and demand for US government bonds and stocks would significantly decline. Revenues, and thus the interest the US government would have to pay its creditors, would rise accordingly. The current easy refinancing of US government debt in financial markets would be nearing its end. The US government would no longer be able to borrow unlimited amounts of money – despite needing it urgently, as the US, in absolute terms exceeding $38 trillion, is the most indebted nation in the world. The collapse of the dollar would also directly impact American companies and consumers, and thus Trump's voters – they would have to accept a huge drop in living standards and welfare losses, thereby bearing the consequences of their president's 'confusing economic policy.' Goldman Sachs economists believe that even generous tax rate cuts would not be able to compensate for this. Although the dollar's value is falling, it is not in immediate danger of losing its global status, as 'currently there is no serious alternative to the dollar.' However, an increasing number of global investors are reconsidering their exposure to the US currency and seeking to diversify their portfolios. In essence, investors worldwide are revising their relationship with the dollar, once the safe haven of global finance. The US dollar has entered a phase of weakening after decades of dominance. Morgan Stanley predicts that the dollar's value could fall by another 10% by the end of 2026. This bank highlights that the dollar has already lost about 11% in the first half of 2025, marking the largest drop in the first part of the year since 1973, thus ending the long-term 'bull cycle' of the greenback (a dollar bull cycle or bull market signifies a period of its significant growth and strengthening against other currencies). Key reasons for this trend lie in changing macroeconomic conditions: US economic growth is expected to slow down (to 1% in 2026 from 2.8% in 2024), and Federal Reserve interest rates are projected to gradually decrease to around 2.5% by the end of 2026. As the interest rate differential between the US and other countries diminishes, the dollar would lose an important pillar of its strength. The dollar's outlook in 2026 is generally weakened, with expectations that the euro will strengthen against the dollar due to the Federal Reserve's interest rate cuts and concerns about US fiscal policy, pushing investors towards 'safer havens' like gold, whose prices analysts predict will rise. The main drivers of change are US monetary policy and global demand for gold. Lower interest rates in the US and general uncertainty encourage gold purchases, which is in direct contrast to the dollar. Major investment banks (Morgan Stanley, J.P. Morgan, Goldman Sachs) are raising their gold forecasts, partly due to the expected weakening of the dollar. In 2026, the dollar will face pressure due to changes in interest rate policies, creating more favorable conditions for the euro's strengthening and the rise in gold prices, which exceeded $5,000 per ounce in February. The Federal Reserve's interest rate cuts make the dollar less attractive compared to other currencies, and the slower growth of the US economy reduces the dollar's overall strength. The dollar's outlook in the coming years, according to forecasts, indicates a weakening due to the expected slowdown of the US economy and falling interest rates, which reduces its attractiveness, although occasional recoveries driven by geopolitical and trade factors may occur, while long-term confidence is questioned despite temporary stabilizations. The dollar's prospects as the main reserve currency are under increasing pressure from de-dollarization due to rising US debt, geopolitical tensions, and the rise of new economic powers (like BRICS). In the long term, a gradual diversification towards other currencies and assets is expected, which would reduce the 'excessive privileges' the dollar provides to the US. The dollar will retain its primacy in the medium term, but a gradual transformation towards a multipolar financial system is evident. Instead of a single dominant currency, the role of other currencies and assets (gold, digital currencies) in international reserves is growing, which will reduce the exclusive benefits that the US has enjoyed for decades. As the dollar gradually loses significance globally, America will ultimately seek to retain it as the reserve currency in the Western Hemisphere in a world it controls. The dollar's share in global foreign exchange reserves has fallen to its lowest level in a hundred years, although the US currency remains the leading global reserve currency. The dollar currently accounts for about 57% of total global foreign exchange reserves. A decade ago, this share was approximately two-thirds, indicating a long-term but persistent decline in confidence in the US currency as a dominant store of value. The old monetary regime has not disappeared but shows signs of serious weakening. From the establishment of the US Federal Reserve in 1913 to 2025, the US dollar has lost about 97% of its value. This loss of value is not the result of a single factor but a combination of many, including inflation, monetary policy, wars, debt, and geopolitical changes. Although the Federal Reserve has played a key role in stabilizing the economy in difficult times, its impact on the long-term value of the dollar is undeniable. In conclusion: de-dollarization shows a visible expansion of a process that is changing the face of the global financial system, although the ultimate goal is still far off. There is no real substitute for the dollar in the short and medium term. The euro and yuan have certain structural limitations. The world is moving towards multipolarity, but not towards a rapid end of the dollar.